A summary of recent developments in insurance, reinsurance and litigation law.

This Week's Caselaw

Wood v Capita Insurance Services: Supreme Court interprets indemnity clause in the sale and purchase agreement of an insurance broker


The sale and purchase agreement for an insurance broker contained an indemnity clause in favour of the buyer for losses "following and arising out of claims or complaints registered with the FSA…against the Company…and which relate to the period prior to the Completion Date pertaining to any mis-selling or suspected mis-selling of any insurance or insurance related product or service". The issue here was that no complaint was made by a customer to the FSA. Instead, following an internal review, the buyer and seller sent the results to the FSA and the FSA then required compensation to be paid to customers. The seller argued that those circumstances fell outside the scope of the indemnity clause.

The Supreme Court (Lord Hodge delivering the leading judgment) reviewed recent caselaw and, in particular, the regard to be had to the commercial background of the contract. It was held that there had been no "rowing back" from the Supreme Court's decision of Rainy Sky v Kookmin. In the more recent Supreme Court decision of Arnold v Britton (in which it was said that "reliance placed in some cases on commercial common sense and surrounding circumstances … should not be invoked to undervalue the importance of the language of the provision").

Lord Hodge described the process of interpretation as "a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense…This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated…Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But …There may often …be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type".

Turning to the indemnity clause in question, it was held that, had the clause stood on its own, the requirement of a complaint by a customer and the exclusion of loss caused by regulatory action might appear to be anomalous. However, when looked at in the context of the agreement as a whole, "It is not contrary to business common sense for the parties to agree wide-ranging warranties, which are subject to a time limit, and in addition to agree a further indemnity, which is not subject to any such limit but is triggered only in limited circumstances". Accordingly, the Supreme Court found in favour of the seller and held that the indemnity clause had not been triggered.

Plevin v Paragaon: Supreme Court holds that ATE insurance premium is recoverable where the policy was "topped up" after 1 April 2013


Changes brought in under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LASPO") resulted in success fees under a CFA and premiums for an ATE insurance policy no longer being recoverable by the winning party on or after 1 April 2013. Of issue in this case was the transitional provisions put in place by the legislation for these changes.

The ATE policy in this case was originally concluded in 2008 and was "topped up" after 1 April 2013 for the appeal to the Court of Appeal, and again for the appeal to the Supreme Court. The top-ups did not give rise to a fresh policy. The transitional provisions relating to ATE premiums provide that "the amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings who took out a costs insurance policy in relation to the proceedings before the day on which this section comes into force" (emphasis added). Unlike the transitional provisions for success fees (which refer to an agreement in connection with the matter that is the subject of the proceedings), the link is with the proceedings themselves.

The policy entered into here, before 1 April 2013, was not a policy relating to the appeals. Nevertheless, the Supreme Court has now held that, for this purpose, the "proceedings" relates to both the trial and the successive appeals: "The topping-up of his ATE policy to cover the appeal is in reality part of the cost of defending what he has won by virtue of being funded under the original policy". Accordingly, the top-up ATE premiums were recoverable here.

Taylor v Van Dutch Marine: Whether secured creditor can enforce rights over an asset subject to a freezing order


The claimant obtained a freezing order against the defendant, restraining it from dealing with its assets. A secured creditor of the defendant then wished to enforce its security, despite the freezing order, and sought the permission of the court to do so.

Mann J held that a secured creditor in a normal enforcement situation (ie not collusive or aiding the breach of the order) does not need to apply to the court for a variation of the freezing order before enforcing its security. That is because a freezing order does not give security and does not affect the genuine rights of third parties over the frozen assets. Nor would this amount to a dissipation, because the secured creditor had a prior right in the form of security over the assets. This differs from eg a defendant wishing to withdraw money from a bank account, because that is a disposal by the defendant, not the bank.

Accordingly, the creditor did not need to seek the court's permission in this case. This case was no different just because there was an issue regarding ownership of the assets in question. If it subsequently transpired that the defendant did not own the assets, that was an issue between the defendant and the secured creditor.

Monroe v Hopkins: A case on when to apply for permission to appeal


Permission to appeal a decision of a court of first instance can be sought from the court or from the Court of Appeal. If the application is to be made to the lower court, this case confirms that it should be made either at the time the judgment is handed down or at a some later date to which the hearing is then adjourned for that purpose (if the parties do not attend when the judgment is handed down, it is common practice to adjourn the hearing to allow an application to be made, even if there has been no indication about the possibility of an appeal).

In this case, the parties attended the hand down and there was no application for permission to appeal, nor any application to adjourn in order to make such an application. Accordingly, Warby J concluded that he no longer had any jurisdiction to grant permission to appeal. The application therefore had to be made to the Court of Appeal instead.